Canada: Case Study: Domovitch v. Willows, 2016 BCSC 1068

This case involves an interesting application of the
Environmental Management Act (the "EMA") and the
Contaminated Site Regulation (the "CSR"). The
defendant, Ms. Willows, purchased the property in 1985. She was
aware that there was an underground oil storage tank (the
"UST") and in fact used the tank throughout her
ownership. She sold the property to the third-party, Mr. Hult, in
1991. In 1999, Mr. Hult had the UST decommissioned. Mr. Hult sold
the property to the plaintiff, Mr. Domovitch, in 2004. He advised
Mr. Domovitch of the presence of the UST and the fact that it had
decommissioned. Mr. Domovitch insisted upon a warranty to that
effect in the contract of purchase and sale.

In 2015, Mr. Domovitch sold the property. Removal of the UST was
a condition precedent to the agreement. When he removed the UST,
Mr. Domovitch learned that the tank had leaked and that the
contamination had spread to the neighbouring property. The
environmental consultant hired by Mr. Domovitch advised that the
property was a "contaminated site" and provided notice to
the Ministry of Environment. Mr. Domovitch spent $38,845 removing
and remediating the site.

The plaintiff sued Ms. Willows pursuant to s. 47(5) of the EMA.
Ms. Willows in turn filed a third-party notice against the
subsequent owner, Mr. Hult. The first issue was whether or not the
plaintiff was an "innocent purchaser" under s. 46(1)(d)
of the EMA and s. 28 of the CSR, given that he knew there was a UST
on the property when he purchased it. The Court framed the issue as
follows: "whether in June 2004 the known existence of an
underground storage tank on the property, which had been
decommissioned five years earlier is, without more, reason to
suspect that the property was contaminated."

The Court suggested that in some cases, this would be sufficient
to make a purchaser a responsible person. However, the Court was
satisfied that Mr. Domovitch did not have reason
to suspect that the property was contaminated given that he
insisted on receiving proof that the UST had been decommissioned,
going so far as to make it a term in the contract. (This result is
interesting given that the fact that the UST was decommissioned
would not provide any information as to the contaminated status of
the property; however, the Court appears to have focused on Mr.
Domovitch's subjective assurance rather than what a
reasonable person would have believed.)

Ms. Willows also claimed to be an "innocent owner" or
at the very least a "minor contributor". However, the
Court rejected those arguments and found that she was a responsible
person, in particular due to the fact that Ms. Willows had used the
UST during her ownership. Thus, because she "caused or
contributed to the contamination of the property", she could
not be considered an innocent owner.

The Court also rejected Ms. Willows' claim that she was at
most a "minor contributor" given that the contamination
likely occurred over several years while she owned the property:
"ownership exceeding five years [during which contamination
was taking place] is not rightly categorized as insignificant or
minor."

This case illustrates two important points to keep in mind:

It should not be assumed that merely
complying with environmental standards that are widely acceptable
today will provide protection when contamination is discovered in
the future. It is important to be proactive in managing
environmental risk in order to avoid becoming a "victim of
historical practices once considered entirely acceptable but now
deemed insupportable by current standards and for which a
retroactive accounting is imposed by legislation", like Ms.
Willows.

It is possible — but not
guaranteed — that mere knowledge of a potential source of
contamination will be insufficient to generate liability, so long
as reasonable steps are taken to minimize risk. However, the result
in this case should be viewed with caution. It is unlikely that a
court would hold a commercial enterprise to the same (low) standard
of risk avoidance to which it held Mr. Domovitch in this case.

On June 29, 2017, the federal government released a discussion paper entitled "Environmental and Regulatory Reviews" ("Discussion Paper"), which proposes broad changes to the federal environmental assessment...

The GC Recently Issued A Discussion Paper Entitled "Environmental And Regulatory Reviews," Which Outlines Its Proposed "Series Of System-Wide Changes" To The Federal EA Regime, Energy Regulation By The NEB...

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